Aug. 31 (Bloomberg) -- California’s Assembly passed the
broadest rollback of public-employee pension benefits in the
state’s history after Democrats who control the Legislature and
Governor Jerry Brown struck a last-minute deal.

The overhaul, which may save taxpayers as much as $55
billion over 30 years, won approval 48 to 8. It would require
new employees to pay half the cost of their benefits and work
longer before they can retire. It also reduces formulas for
calculating benefits and caps pension payments.

Brown, a 74-year-old Democrat, pressed for a revamp to show
progress in curbing soaring retiree costs before he asks voters
for higher income and sales taxes in November. Public resentment
of government employees has grown as taxpayers saw their own job
prospects and benefits shrink in the longest recession since the
1930s.

“This is not the end-all, be-all, but it brings us
considerably down the road to public-pension reform,” said
Assemblyman Warren Furutani, the Long Beach Democrat who headed
a conference committee that drafted the legislation.

The bill must also be approved by the Senate before it’s
sent to Brown for his signature. The Legislature is scheduled to
adjourn today for the rest of the year.

The measure would require new state and local government
employees under the California Public Employees’ Retirement
System or Calpers, the largest public pension in the U.S., to
pay for half of their benefits. The same savings will be sought
from current employees through bargaining with their unions.

Smaller Checks

Retirement checks for new workers would be based on wages
capped at about $110,000 a year, or $132,000 for those not
covered by the federal Social Security system, adjusted for
inflation. For most new civil servants who aren’t police
officers or firefighters, the minimum retirement age for full
benefits would go to 67 from 55.

The bill also takes aim at so-called pension spiking, a
practice that inflates future retirement payments by
manipulating overtime, unused vacation and special compensation.
It also would limit “double dipping,” involving retirees who
collect benefits and also take another government job. And it
would ban workers from buying service credit to boost their
payouts.

Charter counties or cities with their own pension plans,
such as San Jose, Los Angeles and San Diego, would be exempt
from the new rules.

Republican lawmakers panned the overhaul saying it didn’t
go far enough, while public-employee unions said the bill was
overreaching and undermined collective bargaining.

“It doesn’t even scratch the surface of what’s needed in
this state before we ask to raise taxes,” said Assemblyman
Allan Mansoor, a Republican from Costa Mesa.

Cost Savings

Calpers said today the changes may save the state and local
governments $42 billion to $55 billion over the next 30 years.
It wouldn’t immediately improve the system’s unfunded liability,
its actuary said.

Calpers, with assets of $237.3 billion, had 72 percent of
the assets needed to cover obligations to its 1.6 million
beneficiaries as of June 30, 2011, according to a report.

The fund earned 1 percent in the fiscal year that ended
June 30, below its target of 7.5 percent. When Calpers
underperforms, the state and municipalities must make up the
difference to meet its obligations.

Brown last year called for a new type of pension, combining
elements of a 401(k) savings plan common among nongovernment
employers with conventional defined-benefit systems that
guarantee payments for life. Such a so-called hybrid plan would
have spread to workers some of the market risk now borne by
taxpayers, who must make up for pension-investment shortfalls.